Blockchain in Retail

How Blockchain is impacting the Retail Industry

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Counterfeit sneakers make up about 40% of the estimated $600 billion global counterfeit fashion industry. The traditional methods manufacturers have used to assure authenticity, such as seals and certificates, can themselves be counterfeited. But retailers are beginning to implement blockchain technology to solve the counterfeiting problem.

A small, Brooklyn-based sneaker brand called Greats integrated into its Beast Mode shoes, a collaboration with NFL player Marshawn Lynch, a 3-D printed smart tag that can’t be faked. The smart tags contain unique identifying codes in encrypted NFC chips that can be scanned with a phone. Consumers can use these tags to pull blockchain data to see if a sneaker is authentic as well as to see a record of everyone who has owned it.

This proof of authenticity adds value not only to the retail market for expensive consumer goods but also to the resale market. Why is this proof so valuable? Because blockchain records are permanent and tamper-proof. Blockchain acts as a single source of truth.

The retail industry, which sells goods and services to consumers, is a diverse industry made up of many types of businesses: footwear, grocery, electronics, discount retail, membership clubs, specialty apparel, home improvement, and convenience stores, to name just a few. But these different types of businesses share some common problems.

Retail Industry Challenges Blockchain Can Help Solve

  • Products can be easily and profitably counterfeited, hurting brand trust and reducing brand value
  • Customer loyalty programs are fragmented, making them less valuable to consumers, which means they are less effective in their role of strengthening brand loyalty
  • Customers and employees cost retailers billions in fraudulent returns
  • Credit card payments come with high transaction fees and chargeback losses
  • Running out of popular items and overstocking unpopular ones results in lost sales and waste

Consider the problem of return fraud and abuse. It costs retailers $777,877 per $1 billion in sales, according to the National Retail Federation’s 2018 Organized Retail Crime Survey. Types of return fraud include returns of stolen merchandise, employee return fraud, returns of used merchandise (e.g., “wardrobing” or “renting” clothes), returns made by organized retail crime groups, and returns using fake receipts. Bur retailers want to have convenient return policies to encourage consumers to shop with them.

Blockchain can help retailers authenticate and manage these transactions to reduce return fraud. As IBM, a major blockchain solutions provider, puts it, “Blockchain’s trusted and shared system of record creates a permanent digitized chain of transactions, and provides retailers the ability to accurately and quickly trace products throughout the world.” One company that has implemented this tech is the clothing retailer EVRYTHNG, which has embedded its wares with digital identities at the point of manufacture so they can be traced throughout their lifecycle.

How Blockchain May Disrupt the Retail Industry

With blockchain, we can:

  • Create an authentic, tamper-proof digital identity for physical products
  • Track loyalty points securely in real time
  • See if a customer trying to return an item actually purchased it
  • Reduce transaction fees when payments are made in cryptocurrency. Overstock is a pioneering mainstream retailer in the acceptance of bitcoin
  • Reduce chargeback losses by accepting cryptocurrency payments, since such payments are irreversible
  • Improve real-time inventory management by using smart contracts to automatically execute orders and payments so that products are neither over-ordered nor understocked

How It May Impact Consumers

Shifting retail to blockchain could allow consumers to:

How It May Impact Employment

Any major technological change will reduce employment in some areas and increase it in others. Blockchain in the retail industry may:

  • Increase employment for people who understand cryptography, information architecture, software engineering, network infrastructure and integration, and user interface/user experience, according to a July 2017 report by Cognizant, a professional services company
  • Mean that retailers require fewer auditors, in-house accountants, and lawyers to identify fraud and recover damages
  • Reduce employment for brokers and purchasing agents because blockchain may facilitate product procurement
  • Ramp up opportunities for creative thinkers, designers, and product developers as retailers lose less money to fraud, counterfeiting, and other inefficiencies

Amy Fontinelle

Staff Writer

United States